HABIB PROTEINS AND FATS EXTRACTS P.B. NO. 3, N.H. HIRIYUR, CHITRADURGA DISTRICT, (BY ITS MANAGING PARTNER MEHMOOD KHAN, 60 YEARS) Vs. THE COMMISSIONER OF COMMERCIAL TAXES VANIJYA THERIGE KARYALAYA GANDHINAGAR, BANGALORE - 560009

JUDGEMENT

(1.) The assessee has filed this revision petition challenging the order dated 17-4-2008 made in STA Nos.554-555/2003 and S.T. Cross Appeals No.299-300/2007 passed by the Karnataka Appellate Tribunal allowing the Cross Appeals filed by the State Government and partly allowing the appeals filed by the assessee, setting aside the order passed by the First Appellate Authority in KTEG.AP-36-37/2001-02 restoring the assessment order in part.

(2.) The revision petitioner is a partnership firm engaged in the business of manufacture and sale of solvent oil from the Oil Cake at its plant in Hiriyur Taluk, Chitradurga District. It is a registered dealer under KST, CST and the Karnataka Tax on Entry of Goods Act, 1979 (the 'KTEG Act' for short). During the assessment years 1998-1999 & 1999- 2000 in the course of its manufacturing activities, the assessee effected purchase of diesel for use as raw material in the generation of electricity energy in its Captive Generation Set for the purpose of electrical energy. The assessee also effected purchase of Hexane for use as an input/catalyst in the process of extraction of solvent oil, since the diesel as well as Hexane are the raw materials/input which are used in the manufacture and intermediate or finished product specified in the Second Schedule. The assessee has not filed any returns for the assessment years 1998-1999 & 1999-2000. The Assistant Commissioners of Commercial Taxes visited the business premises of the assessee for inspection on 18-12-1999. During the course of Inspection, it was noticed by them that the assessee has purchased high speed diesel and Hexane and caused entry of the same into the local area. No taxes have been paid, accordingly, notice was issued under Section 5(4) of the KTEG Act. Though the assessee was served with notice, no reply has been filed to the said notice inspite of granting sufficient time. Accordingly, assessment under the KTEG Act was concluded and levied entry tax on Diesel and Hexane. The demand notice was issued to the assessee to pay the entry tax at the rate of 5% in respect of high speed diesel and 2% tax is levied in respect of purchase of Hexane and also imposed penalty of Rs.20,000/- for each assessment year under section 5(5) of the Act.

(3.) The assessee being aggrieved by the assessment of entry tax for the assessment years 1998-1999 and 1999-2000 preferred appeals in STA No.554-555/2002 before the Joint Commissioner of Commercial Taxes (hereinafter referred to as 'the First Appellate Authority'). The First Appellate Authority by its order dated 2-2-2002 allowed the appeals in part and deleted the entry tax on High Speed Diesel holding that the diesel constitutes a raw material/input, which has been used to generate electrical energy in the manufacture of intermediate or finished products and also reduced the penalty imposed on the assessee. However, no order has been passed insofar as Hexane is concerned. Being aggrieved by the levy of entry tax on the value of Hexane and levy of penalty for both the assessment years in question, the assessee preferred second appeals before the Karnataka Appellate Tribunal. The State Government being aggrieved by the order of the First Appellate Authority setting aside the assessment order in respect of Diesel for the assessment years 1998-1999 & 1999- 2000 preferred S.T.Cross Appeals No.299-300/2007 before the Karnataka Appellate Tribunal.